AFRE Seminar: Berber Kramer

March 15, 2018 3:30PM - 5:00PM

Berber Kramer, Research Fellow and applied microeconomist in the Markets, Trade and Institutions Division of the International Food Policy Research Institute (IFPRI) will speak on "Improving Farmer Trust and Seller Reciprocity in Agricultural Input Markets: A Lab-in-the-Field Experiment in Bangladesh."

The quality of Agricultural inputs in low- and middle-income countries is often unobservable at the time of purchase, which introduces price competition without a focus on quality, and input sellers provide only low-quality, low-cost products in the resulting market equilibrium. Through a lab-in-the-field experiment with 720 smallholder farmers and input retailers in Bangladesh, this paper test whether accreditation and reward schemes for sellers and buyers of high-quality products can help overcome this low-cost, low-quality equilibrium. The experiment mimics a basic competitive input market with repeated interactions in which retailers set their input prices and quality, while farmers observe price, but not quality, when choosing retailers. We find that in this market, retailers provide mostly low-cost, low yielding products, and farmers pay attention mainly to price, not to expected quality, resulting in low demand for more expensive, high-yielding inputs.

Accrediting sellers based on farmer satisfaction does not significantly improve outcomes, because farmer satisfaction is strongly influenced by price and is hence a noisy signal of retailer quality. Introducing rewards for retailers selling the high-quality product when accredited, or rewards for buyers of the high-quality product from an accredited retailer, leads to higher input quality and more repeat purchases, but farmer earnings improve only when they as buyers are the direct recipients of these rewards. These results suggest that small incentives may be particularly effective as setting up higher quality signals within markets, and that providing these incentives will have larger welfare impacts when incentives are targeting farmers instead of retailers of agricultural inputs.